Raytheon Company awarded $66M+ for engineering services, a sole-source contract with a long performance period

Contract Overview

Contract Amount: $66,042,586 ($66.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2003-12-18

End Date: 2011-08-04

Contract Duration: 2,786 days

Daily Burn Rate: $23.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $66.0 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to cost overruns if not managed carefully. 2. The contract was sole-sourced, raising questions about potential price competition and value for money. 3. A long performance duration of over 2700 days suggests a sustained need for these engineering services. 4. The contract was awarded by the Department of Defense, indicating a focus on national security requirements. 5. The engineering services provided fall under NAICS code 541330, typically involving design and consulting. 6. The contract was managed by the Defense Contract Management Agency, suggesting robust oversight is intended.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific engineering services provided. Cost-plus-fixed-fee contracts inherently carry a risk of exceeding initial estimates, as the contractor is reimbursed for all allowable costs plus a predetermined fee. Without competitive bids, it's difficult to ascertain if the fixed fee represents a fair market rate for the services rendered. The extended duration and significant dollar value suggest a substantial requirement, but the lack of competition prevents a definitive assessment of cost-effectiveness compared to potential alternatives.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one contractor, Raytheon Company, was solicited. This typically occurs when a specific capability is required that only one entity possesses, or in situations where full and open competition is not feasible or in the government's best interest. The absence of multiple bidders means there was no direct price competition, which can limit the government's ability to negotiate the lowest possible price.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding. Without alternative offers, the government could not leverage market forces to drive down costs, potentially resulting in a higher overall expenditure for these engineering services.

Public Impact

The primary beneficiaries are likely components of the Department of Defense requiring specialized engineering expertise. The services delivered are expected to support defense-related projects and potentially enhance military capabilities. The contract's performance is managed by the Defense Contract Management Agency, indicating a focus on ensuring service delivery meets defense standards. The geographic impact is centered in Arizona (ST: AZ, SN: ARIZONA), where the contractor's operations are based.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee structure can incentivize higher spending if not tightly managed.
Long contract duration increases the risk of scope creep or evolving requirements not being optimally addressed.
Lack of transparency in the sole-source justification could hide inefficiencies.

Positive Signals

Award to a major defense contractor like Raytheon suggests access to specialized and potentially critical engineering capabilities.
The contract is managed by the Defense Contract Management Agency, implying a level of oversight and accountability.
The fixed fee component of the contract provides some cost certainty for the government, albeit within a cost-reimbursement framework.

Sector Analysis

The engineering services sector is a critical component of the broader aerospace and defense industry. Companies like Raytheon provide essential design, development, and technical support for complex systems. This contract, valued at over $66 million, represents a significant investment in specialized engineering capabilities within the defense sector. Comparable spending in this area often involves long-term support for major weapon systems or research and development initiatives, where deep technical expertise is paramount.

Small Business Impact

This contract does not appear to have a small business set-aside component (SS: false, SB: false). As a sole-source award to a large prime contractor, it is unlikely to directly benefit small businesses through prime contract awards. However, Raytheon may engage small businesses as subcontractors to fulfill specific aspects of the engineering services required, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), as indicated by the 'sa' field. DCMA is responsible for ensuring contractors meet their contractual obligations, including quality, cost, and schedule. The cost-plus-fixed-fee nature of the award necessitates close monitoring of incurred costs and the reasonableness of the fixed fee. Transparency would be enhanced through public reporting of contract performance and any modifications.

Related Government Programs

Defense Engineering Services
Aerospace and Defense Contracts
Cost-Plus Contracts
Sole-Source Procurements
Department of Defense IT and Engineering Support

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $66.0 million to RAYTHEON COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $66.0 million.

What is the period of performance?

Start: 2003-12-18. End: 2011-08-04.

What is Raytheon Company's track record with sole-source Department of Defense contracts of similar value and duration?

Raytheon Company, now part of RTX, has a long history of engaging with the Department of Defense across various platforms and services. Analyzing their past sole-source awards of comparable magnitude (>$50M) and duration (>2000 days) would reveal patterns in cost performance, delivery timelines, and any recurring issues. Such an analysis would typically involve reviewing contract modification histories, audit reports from the Defense Contract Audit Agency (DCAA), and any Inspector General reports related to their sole-source engagements. Without specific data on Raytheon's historical performance on similar sole-source contracts, it's difficult to definitively assess their reliability and cost-efficiency in this specific instance, though their status as a major defense contractor suggests a baseline level of capability and experience.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for engineering services in the defense sector?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used when the scope of work is not precisely defined, or when there is significant uncertainty in the costs involved, making it suitable for research and development or complex engineering services. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a fixed fee representing profit. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less cost certainty for the government but provides flexibility for the contractor to adapt to evolving requirements. Compared to Cost-Plus-Incentive-Fee (CPIF) contracts, the fee in CPFF is fixed, meaning there's less direct incentive for the contractor to control costs beyond what's necessary to remain within allowable expenses, whereas CPIF ties a portion of the fee to performance metrics, including cost targets. For well-defined engineering services, FFP contracts generally offer the best value and cost control for the government.

What are the primary risks associated with a sole-source award for engineering services, and how are they typically mitigated?

The primary risk of a sole-source award for engineering services is the potential for inflated pricing due to the lack of competition. Without competing bids, the government may not achieve the best possible price. Another risk is reduced innovation, as the sole provider may have less incentive to explore cost-saving or efficiency-enhancing methods. Mitigation strategies often include robust government negotiation, detailed cost analysis (e.g., using Should Cost and Will Cost models), establishing clear performance metrics and deliverables, and implementing strong oversight by contract management teams like the DCMA. Additionally, the government may require the contractor to provide detailed cost breakdowns and justifications to ensure reasonableness. Periodic reviews and the potential for re-competition at future milestones can also serve as risk mitigation tools.

What is the typical duration and value range for engineering services contracts awarded by the Department of Defense?

The duration and value of engineering services contracts awarded by the Department of Defense can vary significantly based on the complexity and scope of the services. Contracts can range from short-term, project-specific engagements lasting a few months and valued in the low millions, to long-term, comprehensive support agreements spanning several years and exceeding hundreds of millions of dollars. This particular contract, with a duration of approximately 7.7 years (2786 days) and a value exceeding $66 million, falls within the upper range for duration and is a substantial award, suggesting it supports a critical or long-standing requirement. Many large-scale defense engineering efforts, such as platform sustainment, system upgrades, or advanced R&D, often necessitate multi-year contracts to ensure continuity and leverage contractor expertise over extended periods.

How does the geographic location of contract performance (Arizona) influence the overall cost and execution of this engineering services contract?

The geographic location of contract performance, in this case Arizona, can influence the overall cost and execution of an engineering services contract in several ways. Labor costs are a significant factor; depending on the prevailing wage rates and cost of living in Arizona compared to other potential performance locations, labor expenses can be higher or lower. Logistics and travel costs for personnel may also be affected if the work requires significant on-site presence at various DoD facilities or if specialized equipment needs to be transported. Furthermore, the availability of a skilled engineering workforce within Arizona could impact recruitment and retention efforts for the contractor. While the provided data indicates the contract's 'state' is AZ, the specific performance location within Arizona and its proximity to relevant DoD installations or Raytheon facilities would provide more context on its direct impact on execution efficiency and cost.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1151 EAST HERMANS ROAD, TUCSON, AZ, 85706

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline